Question

THE GLOBAL BUSINESS ENVIRONMENT PBA4802

MAY/JUNE 2019 PORTFOLIO EXAMINATION

Question

You have just completed a PGD module “The Global Business Environment” at the SBL. You have read an article that appeared in an international newspaper about South Africa titled “South Africa must Beware of Falling Behind” (see article below) and you noticed that there are some assumptions made in the article that you do not agree with. You have decided to write a critical review to the editor of the international newspaper where you question the accuracy of the assumptions made in the article.

Your will be assessed on the following criteria:

• Following instructions . If you default on any one instruction you will get zero marks.

• Structure (identification of the main incorrect assumptions made in the article), communication skills and a clear story line .

• The extent to which you applied the learning outcomes of the module in a practical setting, the strength of your analysis and your ability to think critically .

Start the article as follows:

Dear Editor,

With reference to your article “South Africa must Beware of Falling Behind”, published on 30 October 2019, I find some of the assumptions made in the article incorrect and misleading. [maximum four]

The article assumes <your statement of the assumption in article and your critique of the assumption>.

South Africa must Beware of Falling Behind

South Africa's performance in the 2017-2018 World Economic Forum Global Competitiveness Index (WEF GCI) slipped 14 positions from the 2016-2017 WEF GCI results, leaving the country ranking 61 out of 137 economies assessed in the annual survey. The 2017- 2018 WEF GCI also noted that South Africa’s economy is nearly at a standstill, with GDP growth forecast at just 1.0 percent in 2017 and 1.2 percent in 2018—hit by persistently low international demand for its commodities, while its unemployment rate is currently estimated above 25 percent and rising.

One of the most disconcerting aspects of South Africa's current position is its lack of international competitiveness compared to Mauritius. The 2018 World Competitiveness Report rated Mauritius 45th and South Africa 61th. The good news however is, apart from Mauritius, South Africa is more competitive that most other African countries with Botswana rated 63 and Namibia 90.

Perhaps one should first look at the precise meaning of the concept of country competitiveness. Let us now take a very simplified example: Suppose a motor dealer in Singapore wishes to import motor cars. The South African supplier wants R500 000 per vehicle (landed), while an Argentinean supplier is asking, for the same vehicle, only R400 000 per vehicle (landed). The Argentinean model may be cheaper for several reasons, the most likely being lower wages, fewer strikes, higher productivity and so on. This would therefore indicate that Argentina is more competitive than South Africa.

South Africa's lack of competitiveness should be seen against the background of an indomitable principle – globalisation of the world - shrinking space, shrinking time and the disappearance of borders. In simple terms this means that because of declining impediments to trade, technological advances, reduces transport costs, the internet; money, labour and goods can move more freely across political boundaries than in the past, thus national economies are ascending into one global village. Globalisation stimulates international trade when it is free and fair, which means that it should have a positive effect on economic growth. But "it's a jungle out there” and any country who cannot hold his own will simply go under.

A country - or a company or whatever economic unit can, however, only just hold its own, if it is competitive, if it is able to provide better and cheaper products than its competitors, or possibly as good and as cheap as them, but definitely not of a poorer quality and more expensive. In the past, South Africa has been able to artificially benefit its own diesel engine industry with heavy subsidies and high tariffs for imported engines - but still could not made it in the international competitive stage. Ultimately, South Africa's lack of competitiveness may have several negative results. It discourages investments that create jobs, and so the vicious circle of poverty, the shortage of government funds to provide basic services, fight crime, low growth, and thus even greater poverty, goes on.

Answer 1

Dear editor,

With reference to your article" South Africa must beware falling behind" there are some assumption which appear undefined and unsubstantiated and hence needs critical evaluation.

The assumption that South Africa growth story is subdued is based because of its lack of competitiveness due to low commodity prices is truly uncertain. As there are various other factors which contributes low growth like absence of quality government economic policies, conflicting views between Government and central bank, geopolitical risks, rising trade tensions ,etc.